Qualitative risk analysis

The main goal of the organization of any entrepreneurial activity is to obtain the maximum income. However, any business entity, when investing its capital, faces manifestations of certain risks, sometimes even losses that may be associated with the failure of expected revenues. As a result, a zero result can be obtained from the implementation of a new project, or even an entrepreneur will suffer losses. A qualitative risk analysis can help in preventing these negative consequences.

It provides for risk assessment in the event of their occurrence using established criteria that must take into account all costs, as well as environmental factors and socio-economic aspects.

Qualitative analysis makes it possible to obtain a result that determines the classification of risks in terms of the probability of their occurrence and the expected consequences.

The main problem in their management lies in the correct definition of their list at the identification stage. Without this, it is simply impossible to manage these negative factors due to the need to attract significant staff and financial costs. Therefore, qualitative analysis is aimed at the correct division of risks into groups and their alignment in a certain order according to priorities. Their classification, for example, can be carried out by temporal proximity. Those risks that can be detected in the near future should have a higher priority than those that are expected in the distant future. In order to properly build them, it is necessary to conduct an analysis using the probability of occurrence and their impact on a future or current project.

Qualitative analysis is fast enough and from inexpensive ways of assigning priorities, it is carried out during the entire cyclic existence of the project. Also, it must reflect absolutely all the changes that can relate to the manifestations of risks in the project.

The main task of qualitative analysis is the identification of risk factors and the stage at which they occur or in the process of carrying out their work. In other words, this kind of analysis allows you to potentially establish their areas first, and then already - to determine absolutely all varieties.

The assessment of financial risks consists in determining the impact on their degree in the project. Conditionally, all factors are divided into two main groups: subjective and objective.

Objective factors include factors that do not depend on the firm itself, but are consequences of the economic or political situation in the state. This is competition, inflation, economic and political crises, customs duties, ecology, etc.

But subjective factors depend directly on the activities of the company itself. This, for example, is the production potential, the level of technical specialization, equipment, labor organization, the level of safety engineering, the level of labor productivity, etc. This type of factor is of great importance for the organization, since it also determines the profit received after the completion of the project.

With the correct and timely detection of these risks, you can significantly reduce or completely prevent their negative impact on the implementation of the entire project. To do this, it is necessary to apply qualitative analysis very skillfully and to develop appropriate effective measures to minimize such negative consequences.

That is why any manifestations of financial risks should be controlled in the process of concluding any transactions or making money transactions. Otherwise - there is a possibility of receiving losses, and possibly ruin.